Western Australian investors have finally realised that it’s not all doom and gloom and are starting to breathe new life into the property market.

There is change on the horizon for the Perth property market. After a year of almost complete stagnation, house prices rose 2.15% over the September quarter, according to Residex. It will only be a matter of time before the market is buzzing again.

However, for the time being, “there’s still a lack of confidence in first homebuyers, investors and upgrade buyers and, as a result of that, there’s a general lack of activity,” says Brendon Ptolomey, director of property advisor Herron Todd White in Perth. “We’re hearing from brokers and agents that there are more people enquiring about finance and more people walking through home opens, but getting them to sign at the moment is proving to be a bit more difficult.”

Buyers are also targeting cheaper properties around the $300,000–400,000 mark, dragging the median down by 4% to $480,000 during the three months to September, according to the latest data from the Real Estate Institute of Western Australia (REIWA).

The recent flood in listings has also created stiffer competition among sellers, resulting in many vendors opting to drop their asking prices by as much as 6%.

“The number of properties on the market has steadily increased over the last year and has now reached 16,000, the highest level since December 2008. As a consequence, the percentage of sellers prepared to drop their asking price has increased from 60 to 67%, with the average discount now being 6% off the advertised price,” says Alan Bourke, REIWA president. While properties are taking less time to sell, with the average number of selling days dropping from 66 to 63, the market remains sluggish, according to Bourke.

“Turnover in the September quarter is down by about 25% on the long-term average which is obviously contributing to the build-up of properties for sale,” he says.

Brighter days ahead?

While the current and near-term prognosis for the WA property markets is still dreary, the medium-term outlook is brighter thanks to the state’s strong underlying fundamentals.

Every measurement, from population growth to jobs growth to wage growth to dwelling supply, points towards a real estate golden age. Which is why Ptolomey is so puzzled by investor timidity. “That’s what I don’t understand,” he muses. “I would have thought now was a great time to go out there and negotiate a bargain in terms of finding properties that may have been on the market for a while and gone a little bit stale, whose asking prices might be dropping.”

BIS Shrapnel is predicting a 20% growth in median house values in the Perth market over the next three years. “It’s due to accelerating economic growth and, on the back of that, rising income growth, as well as a substantial deficiency of dwellings,” says Angie Zigomanis, residential property expert at the firm. “The Perth market went into a downturn in 2006/07, pre-empting the global financial crisis, so it’s starting from a lower base compared to the other cities. That gives it a bit more scope for stronger price growth.”

Zigomanis notes that the continuing resources boom will simply not allow the market to remain in the doldrums.

“The sheer amount of work that’s in the pipeline for the next two or three years in terms of mining expansion projects will create jobs growth that will flow through into Perth,” Zigomanis says. “The construction jobs are on-site but everything else comes through the capital city.”

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